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It's Official: Budget Projections Have Changed

Last month after the Bureau of Economic Analysis revised their GDP numbers going back to 1929, we decided to take the intiative and project what the changes would do to CBO's current ten-year budget projections. Now, CBO has graciously confirmed our numbers with a re-release of their May baseline numbers incorporating the new GDP estimates. That they came to the same conclusion is no surprise, since they did not change their previous economic growth projections; instead, they simply adjusted the GDP levels.

Since it was only the GDP levels that have been adjusted upward, the adjustment to the debt-to-GDP ratio is also only a level change, rather than a trajectory change. Debt is projected to fall from a high of 73.6 percent of GDP in 2014 to a low of 68.4 percent in 2018 before rising to 71.1 percent in 2023. There is a similar story for the CRFB Realistic baseline, which incorporates current policies into the numbers. In that baseline, debt will fall from 74 percent in 2014 to 69.5 percent in 2018 before rising to 73 percent by 2023.

[chart:9074]

Source: CBO, CRFB

Under current law, spending will total 21.1 percent of GDP over the next ten years while revenue will total 18.3 percent, for a ten-year deficit of 2.9 percent of GDP. In 2023, those totals will be 21.8 percent, 18.5 percent, and 3.3 percent, respectively. In the CRFB Realistic baseline, spending will total 21.3 percent of GDP, revenue will total 18.3 percent, and the deficit will total 3.1 percent over the next ten years. In 2023, those totals will be 22 percent, 18.5 percent, and 3.5 percent, respectively.

CRFB Realistic Budget Metrics (Percent of GDP)

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

Revenue

17.0%

17.7%

18.6%

18.5%

18.3%

18.2%

18.1%

18.1%

18.2%

18.4%

18.5%

Outlays

20.8%

21.2%

21.0%

21.0%

20.8%

20.8%

21.2%

21.4%

21.6%

22.0%

22.0%

Deficit

-3.9%

-3.5%

-2.4%

-2.5%

-2.5%

-2.7%

-3.1%

-3.3%

-3.4%

-3.6%

-3.5%

Debt

72.5%

73.9%

72.7%

71.1%

69.8%

69.5%

69.9%

70.5%

71.2%

72.2%

73.0%

Memo: GDP in Trillions

$16.6

$17.2

$18.3

$19.5

$20.7

$21.7

$22.7

$23.7

$24.7

$25.7

$26.8

Source: CBO, CRFB

As you can see, the new GDP numbers only change debt-to-GDP levels going forward rather than the trajectory. We will have a much better idea next Tuesday what the long-term fiscal outlook will look like, but in all likelihood it will show the federal debt is on an unsustainable path over the long run.